Strategic Management: Formulation and Implementation

The Matrix Quantified

In this chart, growth rate and relative competitive position are plotted on continuous scales. Each circle in the display represents a single business or business segment, appropriately defined.

To convey an impression of the relative significance of each business, size is indicated by the area of the circle, which can be made proportional to either turnover or assets employed.

Relative competitive position is plotted on a logarithmic scale, in order to be consistent with the experience curve effect, which implies that profit margin or rate of cash generation differences between competitors will tend to be related to the ratio of their relative competitive positions (market shares).

A linear axis is used for growth, for which the most generally useful measure is volume growth of the business concerned, as in general rates of cash use should be directly proportional to growth. The lines dividing the portfolio in four quadrants are inevitably somewhat arbitrary.

As one of the BCG Matrix's original purposes was to help firms decide which businesses should grow and which businesses should exit, the matrix has been used in corporate strategic decisions.